Palestine Investor Conference Lost Amid Flotilla Fallout

Amid the days of turmoil surrounding the Israeli raid on the aid flotilla headed for Gaza in which nine died, thousands of corporate investors and international donors, including US Middle East envoy George Mitchell, gathered at the Palestine Investment Conference (PIC) to bolster the Palestinian economy.

The conference, which took place June 2-3 in Bethlehem, brought together more than 2,000 individuals from 35 countries as well as hundreds of local, regional and international companies to promote foreign investment in the West Bank and Gaza. The first PIC was held in 2008, also in Bethlehem.

Following an evening reception hosted by Palestinian Minister of National Economy Hasan Abu Libdeh, the conference opened with major plenary sessions addressed by Palestinian President Mahmoud Abbas, Prime Minister Salam Fayyad and US Middle East envoy George Mitchell.

According to the State Department, the PIC pledges should "strengthen the Palestinian economy, support institution building, and lay the foundation for a future Palestinian state." In particular, the funds will be directed at high-growth sectors, including tourism, housing, information and communication technology. The United States, France and Italy pledged a total of $655 million to aid in the development of the Palestinian private sector.

Under separate circumstances, President Barack Obama announced Wednesday, on the heels of his White House meeting with Abbas, that the United States will provide an additional $400 million in aid for the West Bank and Gaza Strip, the latter of which Obama describes as an "unsustainable" situation. It remains unclear at this point, however, how that funding will be used and what portions will go the West Bank and Gaza, respectively.

According to the PIC organizers, the point of the investment efforts is to build "the institutional, social and economic infrastructure that will underpin a viable Palestinian state and enhance the ability of Palestine's citizens to prosper in parity with other nation states."

Speaking at the conference, US Deputy Secretary of Treasury Neal Wolin echoed the conference organizers, saying, "promoting investment, entrepreneurship and economic reform is not just about unlocking untapped potential. It is about preparing the ground for a truly independent Palestinian state."

Wolin acknowledged some of the logistical problems imposed on the Palestinian economy saying, "Israel's cooperation will be important to this effort. Further progress on issues related to movement and access of both people and goods will be needed."

But for Wolin, "it is up to the Palestinian Authority and the Palestinian people, first and foremost, to take the lead, to lay the foundations for growth; not just to demand progress, but to make progress."

Acting in his role as peace negotiator, Mitchell argued in his remarks that sustainable peace is dependent on a strong Palestinian economy which, in turn, is dependent on a robust private sector.

Mitchell said that a future Palestinian state will need "strong public institutions and a vibrant private sector, where the Palestinian economy will be better connected to the region and the world, and where all Palestinian families - in Gaza and the West Bank - will have the opportunity to reach their full potential."

He further emphasized that the only realistic path to peace is through the two-state solution and that "the only realistic path to two states is to move forward, at the same time, on political, economic, and security issues. All are essential to success."

Mitchell highlighted the growth in mobile telephone providers, construction of affordable housing in the West Bank, Christmas tourism to Bethlehem and "the roads and crossings of the West Bank, where there is improved access to domestic and external markets," while also acknowledging that it's "not fast enough, or broad enough," but also stating, "the direction is the right one."

Mitchell turned to Al-Amal Mortgage Company, one of the centerpieces of the conference, as one of the success cases of foreign investment. The half-billion dollar mortgage finance entity, which will provide loans to Palestinians for up to 25 years, is a joint project established by the Palestine Investment Fund, the UK Department for International Development, Bank of Palestine, Cairo Amman Bank, International Finance Corporation, the Overseas Private Investment Corporation and two US nonprofits, the Middle East Investment Initiative and CHF International.

Mitchell said that Al-Amal is an entity that "should help bolster the affordable housing initiatives, boost the local construction market, and create jobs in the near-term."

Blatantly missing from Mitchell's examples was Gaza. His only mention of it was the flotilla raid, which he said, "underscores the need to make progress in negotiations that lead to the two-state solution." He further declared, "The tragedy of last week cannot be allowed to spiral out of control and undermine the limited but real progress that's been made."

Mitchell insisted that the United States will "continue to work aggressively to see that the full range of the needs of all of the people of Gaza are met," but offered nothing in the way of examples or steps as to how that would be realized.

In his opening presentation, Palestinian President Abbas more overtly addressed Gaza, while tacitly ceding that it has been lagging behind the West Bank in the realms of development and foreign investment.

"While we are talking about the projects and the promising developmental and economic horizons in the West Bank, I would like to remind you of the importance of spreading this benefit among our people in Gaza," said Abbas. "So they can share our economic and investment success, and to have a chance to rebuild and construct, so they can feel the benefits in their daily lives. They are part of us and we are part of them. We will never give up on them."

While somewhat recognizing that the Palestinian Authority (PA) is split from the Hamas-run Gaza, Abbas nonetheless said that the Palestinian Authority dedicates 58 percent of its annual budget for the utilities and salaries of employees in Gaza. He further stated that the PA considers itself "fully responsible for the 1.5 million Palestinians living in Gaza."

Francis A. Boyle, professor of international law at the University of Illinois College of Law, suggested that the enhanced enthusiasm during the conference was "basically a public relations exercise, given what is going on [with the flotilla raid]."

In something of a cruel irony, the raid of the Gaza-bound flotilla drawing more interest at the conference may not translate into a boost in investor dollars there.

Boyle, who served as legal adviser to the Palestinian delegation to the Middle East peace negotiations from 1991 to 1993, said that the disparity between the West Bank and Gaza is nothing new, arguing that this is a long-standing strategy: "build up the West Bank and starve Gaza." Boyle sarcastically added that maybe Gazans wouldn't starve since last week "under American pressure Israel agreed to send junk food into Gaza."

Others point out that the international community doesn't exactly have the best track record when it comes to helping Gaza, even when efforts are explicitly for that purpose.

In March 2009, an international donor conference was held in Sharm el-Sheikh, Egypt, to assist in the reconstruction of Gaza after it was left decimated from three weeks of Israeli air and land invasion. The conference, which raised over $5 billion (nearly twice the amount the PA requested), was viewed as a success at the time, but has not yet yielded the intended results, leaving Brian Katulis of the Center for American Progress asking the question: "How much of that money has helped improve the lives of ordinary Palestinians?"

It's a question Katulis also asks of the PIC, but he also pointed out that the PIC may still have some benefit for Gaza - and the Palestinians as a whole - even if it's not immediately economic. Katulis, a former development worker in the West Bank and Gaza, suggested that reconciliation between the West Bank and Gaza may be out one of the more positive outcomes. "If there's a silver lining to last week's flotilla fiasco, it brought the West Bank-Gaza divide back to the forefront of discussions," said Katulis.

"Senior policymakers acknowledge that it is a challenge, and I'm glad we have top administration officials recognizing once again that the current approach to Gaza is unsustainable," Katulis said, "but actions speak louder than words, and tactics are not a substitute for strategy."